Question

osito, Inc. uses a justminusinminustime costing system. During the​ month, Esposito incurred $ 600 comma 000 as direct labor and $ 7 comma 000 as overhead. Wages were not paid. Which of the following is the correct journal entry to record the conversion​ costs? A. Conversion Costs 607 comma 000      Accounts Payable 607 comma 000 B. Manufacturing Overhead 607 comma 000      Conversion Costs 607 comma 000 C. Conversion Costs 607 comma 000      Wages​ Payable, Accumulated​ Depreciation, etc. 607 comma 000 D. Conversion Costs 607 comma 000      Wages Payable 607 comma 000

Answer 1

C) Debit Conversion cost $607,000 Credit Wages​ Payable, Accumulated​ Depreciation, etc. $607,000

Step-by-step explanation:

First we understand what conversion cost is

Conversion cost represents the cost that is relevant and incurred when a manufacturing organisation converts its obtained raw materials into its sell-able finished goods.

As such, what is the relevant conversion cost here

= The total conversion cost = Direct Labour + Overhead

= $600,000 + $7,000 = $607,000

Step 2: Since, wages were not paid, the account to use is wages payable, therefore the journal entry will be

Description Debit Credit

Conversion Costs $607,000

Wages Payable, Accumulated Depreciation etc $607,000